Bitcoin tried and failed to break and hold the $25,000 level for five out of the last six days. This isn’t necessarily a bad thing, some technicians believe, as the world’s largest cryptocurrency by market capitalization is forming an ascending triangle structure that could push it higher towards the next key resistance area around $28,000. .
But others worry that this year’s rally, in which the BTC price has already rallied close to 50%, may stall. Pricing in bitcoin derivatives markets is a way of measuring how investors feel about BTC’s outlook as well as its potential for volatility. Here’s a look at what the markets are saying about options right now…
Investors Neutral on BTC Price Outlook
According to the widely followed 25% delta skew of bitcoin options that expire in 7, 30, 60, 90 and 180 days, investors are currently broadly neutral in their outlook for the price of bitcoin. According to data provided by crypto analytics firm The Block, all five 25% delta skews are close to zero, well above last year’s immediate post-FTX collapse, but slightly below the highs printed earlier this year. .
The 25% delta option skew is a popular monitored proxy of the extent to which trading desks are charging investors more or less for the upside or downside protection through put and call options being sold. A put option gives an investor the right but not the obligation to sell an asset at a predetermined price, while a call option gives an investor the right but not the obligation to buy an asset at a predetermined price.
A 25% delta option skew above 0 suggests that desks are charging more for equivalent call options versus puts. This implies that demand for calls versus puts is higher, which can be interpreted as a bullish sign as investors are more eager to hedge (or bet) a security against a rise in prices.
However, a different alternative market indicator of investor sentiment is sending more bullish signals. According to data presented by The Block, the open interest put/call ratio of bitcoin options last stood at 0.41, which is still very close to the record low recorded in late January/early February. An open interest put/call ratio below 1 means that investors favor call options (bets on price increases) over put options (bets on price drops).
Investors are positioning for a rise in volatility
Bitcoin’s 7-day implied volatility according to the at-the-money (ATM) options market recently edged closer to its highest level in the month, according to data presented by The Block. On Saturday, it rose from its first monthly low of below 40% to just below 60%. Meanwhile, the 30-day ATM implied volatility was also around 60% and in line with its earlier monthly high.
According to ATM Options Markets, the latest increase in volatility expectations has gone hand-in-hand with the bitcoin market’s recovery from prior monthly lows of $21,000. It is worth noting that Bitcoin ATM implied volatility expectations are well below historical comparisons and the most recent January 2023 and November 2022 highs.
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